J.M. MEHTA & CO., MUMBAI V. ITO 19(2), MUMBAI

ITA 664/MUM/2012

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 1713 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 1 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-03-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: J
• Next Hearing Date: 06-03-2013
• Assessment Year: 2008-2009
• Appeal Filed On: 01-02-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MRS DIVYA BAJPAI
• Assessee Lawyers: VIJAY KOTHARI
• Keywords: Deemed to accrue or arise in india; Deemed dividend

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL J , BENCH , MUMBAI , BEFORE SHRI R.K.GUPTA , J M & SHRI R.S.SYAL , A M ITA NO. 664 / MUM / 20 1 2 ( ASSESSMENT YEAR : 200 8 - 20 0 9 ) M/S J.M.MEHTA & CO., 36, OSIS, NEHRU ROAD, VAKOLA, SANACRUZ - E, MUMBAI - 400 055 VS. ADCIT, WARD 19(2), P I RAMAL, MUMBAI . PAN/GIR NO. : A ABFJ 4870 G ( APPELLANT ) .. ( RESPONDENT ) /ASSESSEE BY : SHRI VIJAY KOTHARI /REVENUE BY : MRS. DIVYA BAJPAI DATE OF HEARING : 1 1 TH FEB ., 201 3 DATE OF PRONOUNCEMENT : 01 / 03 / 201 3 O R D E R P ER SHRI R.K.G UPTA, JM : TH E ASSESSEE HAS PREFERRED THIS APPEAL AGAINST THE ORDER DATED 23 - 12 - 2011 , PASSED BY THE CIT(A) - 30 , MUMBAI , RELATING TO ASSESSMENT YEAR 2008 - 0 9 . 2 . THE FIRST ISSUE IN APPEAL OF THE ASSESSEE IS AGAINST THE CONFIRMING THE ADDITION OF RS.46,00,000/ - A S DEEMED DIVIDEND UNDER SECTION 2(22)(E) OF THE ACT. 3 . BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A PARTNERSHIP FIRM AND IS ENGAGED IN THE ACTIVITY OF MAN POWER CONSULTANCY RECRUITMENT ITA NO. 664 /20 1 2 2 AND OTH ER ACTIVITIES. FROM THE DETAILS FILED DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE AO NOTED THAT THE ASSESSEE HAS RECEIVED UN - SECURED LOANS AMOUNTING TO RS. 46,00,000/ - FROM M/S. J.M. MEHTA TRAVEL & TOUR CO. PVT. LTD. ( IN SHORT JMMTTCPL ). FROM THE CON FIRMATION FILED DURING THE COURSE OF ASSESSMENT PROCEEDINGS, IT WAS SEEN THAT ON THE OPENING OF THE YEAR THERE WAS UNSEC URED LOANS FROM JMMTTCPL AT RS. 29.29 LAKHS. THE ASSESSEE HAS REPAID RS.26,00,000/ - ON 5.4.2007. SUBSEQUENTLY JMMTTCPL HAS GIVEN LOAN OF RS.26,00,000/ - ON 7.4.2007 AND ANOTHER LOAN OF RS. 15,00,000/ - AND RS. 5,00,000/ - ON 19.02.2008 AND 31.3.2008 TOTALLING TO RS. 46,00,000/ - DURING THE YEAR UNDER CONSIDERATION. THE AO NOTICED THAT THE PARTNER OF THE ASSESSEE FIRM ARE SHAREHOLDER IN M/S JM ME HTA CO. P.LTD. AND HAVING MORE THAN 10% SHARES OF M/S JM MEHTA CO. P.LTD. . THEREFORE, THE AO WAS OF THE VIEW THAT PROVISIONS OF SECTION 2(22)(E) ARE ATTRACTED ON THE FACTS OF THE PRESENT CASE. AFTER CONSIDERING THE SUBMISSION FILED ON BEHALF OF THE ASSESS EE, THE AO VIEWED THAT A SUM OF RS. 46 LAKHS IS DEEMED INCOME UNDER SECTION 2(22)(E) OF THE L.T. ACT . 4 . DETAIL SUBMISSIONS WERE FILED BEFORE THE CIT(A). RELIANCE WAS PLACED ON VARIOUS DECISIONS INCLUDING THE DECISION OF HON BLE BOMBAY HIGH COURT IN THE C ASE OF CIT VS. NAGINDAS M. KAPADIA (1998) 75 CTR (BOM) 161 AND IN THE CASE OF BHOUMIK COLOUR PVT. LTD . , 313 ITR 146 (AT) . AFTER CONSIDERING THE SUBMISSION AND PERUSING THE MATERIAL ON RECORD, LEARNED CIT(A) FOUND THAT IN VIEW OF THE DECISION OF ITA NO. 664 /20 1 2 3 THE HON BL E DELHI HIGH COURT IN THE CASE OF CIT VS. NATIONAL TRAVELS SERVICES, (2012) 347 ITR 305 , WHEREBY IT WAS HELD THAT IF THE SHARES W ERE HELD BY THE PARTNER ON BEHALF OF THE ASSESSEE, THEN PROVISIONS OF SECTION 2(22)(E) ARE ATTRACTED. ACCORDINGLY, THIS DECISION OF HON BLE DELHI HIGH COURT WAS APPLICABLE ON THE FACTS OF THE PRESENT CASE AND, THEREFORE, HE CONFIRMED THE ORDER OF THE AO. 5 . THE LEARNED COUNSEL OF THE ASSESSEE STATED THAT THE ISSUE IS SQUARELY COVERED BY THE DECISION OF THE SPECIAL BENCH IN THE CAS E OF BHAUMIK COLOUR PVT. LTD. (SUPRA) , WHICH HAS BEEN AFFIRMED BY THE HON BLE BOMBAY HIGH COURT IN THE CASE OF M/S UNIVERSAL MEDICARE, 324 ITR 263 . IT WAS FURTHER SUBMITTED THAT IN VARIOUS OTHER CASES ALSO SIMILAR VIEW HAS BEEN EXPRESSED I.E. IN THE CASE O F C IT V. HOTEL HILLTOP , (2009) 313 ITR 116 (RAJ) AND CIT VS. RAJ KUMAR SINGH AND CO., (2007) 295 ITR 9 (ALL) . IT WAS FURTHER SUBMITTED THAT THE DECISION OF THE HON BLE DELHI HIGH COURT WAS FOUND DISTINGUISHABLE BY THE TRIBUNAL IN THE CASE OF M/S LAXMI JEWE LLERY, IN ITA NO. 316/MDS/12, DECIDED ON 13 - 9 - 2012 . COPY OF THE SAME WAS ALSO FILED. ACCORDINGLY, IT WAS SUBMITTED THAT SINCE THE ASSESSEE FIRM IS NOT A SHAREHOLDER OF M/S J.M.MEHTA CO.PVT. LTD., THEREFORE, NO ADDITION CAN BE MADE UNDER SECTION 2(22)(E) OF THE ACT. 6 . ON THE OTHER HAND, LEARNED DR PLACED RELIANCE ON THE ORDER OF THE CIT(A). IT WAS FURTHER SUBMITTED THAT LEARNED CIT(A) WAS JUSTIFIED IN ITA NO. 664 /20 1 2 4 PLACING RELIANCE ON THE DECISION OF THE HON BLE DELHI HIGH COURT AS FACTS ARE SIMILAR IN THE PRESENT CASE. 7 . WE HAVE HEARD RIVAL SUBMISSIONS AND CONSIDERED THEM CAREFULLY. AFTER CONSIDERING THE SUBMISSIONS AND PERUSING THE MATERIAL ON RECORD, WE FOUND THAT THE ASSESSEE DESERVES TO SCUDDED ON THIS ISSUE. THE JURISDICTIONAL HIGH COURT IN THE CASE OF UNIVERSAL MEDICAL PVT. LTD. (SUPRA) , HAS UPHELD THE DECISION IN THE CASE OF BHAUMIK COLOUR PVT. LIMITED (SUPRA) , DECIDED BY THE SPECIAL BENCH OF THE TRIBUNAL, WHEREIN IT WAS HELD THAT NO ADDITION CAN BE MADE IN VIEW OF THE PROVISIONS OF SECTION 2(22)(E) OF THE ACT, I F THE PERSON WHO OBTAINS LOANS IS NOT A SHAREHOLDER. UNDISPUTEDLY, THE ASSESSEE FIRM IS NOT A SHAREHOLDER OF THE COMPANY FROM WHO LOAN OF RS. 46,00,000/ - HAS BEEN TAKEN. PARTNER OF THE ASSESSEE FIRM ARE SHAREHOLDER OF THE COMPANY, HOWEVER, AS SATED ABOVE, T HE ASSESSEE FIRM IS NOT A SHAREHOLDER. THE DECISION OF THE H O N BLE DELHI HIGH COURT RELIED UPON BY THE LEARNED CITDR, IN OUR VIEW, IS DISTINGUISHABLE AS IN THAT CASE IT WAS FOUND THAT THE SHARES WERE OBTAINED BY THE PARTNER ON BEHALF OF THE FIRM. IN THE PR ESENT CASE, AS ARGUED BY THE LEARNED AR THAT SHARES WERE NOT OBTAINED BY THE PARTNER ON BEHALF OF THE ASSESSEE AS THERE WERE SHARE HOLDER INDEPENDENTLY. SINCE THE ISSUE IS COVERED BY THE DECISION OF THE HON BLE JURISDICTIONAL HIGH COURT, WHICH IS BINDING I N NATURE, THEREFORE, RESPECTFULLY FOLLOWING THE DECISION OF THE HON BLE BOMBAY HIGH COURT, WE HOLD THAT SINCE THE ASSESSEE FIRM IS NOT SHAREHOLDER OF M/S JM ITA NO. 664 /20 1 2 5 MEHTA CO. LTD., FROM WHOM LOAN OF RS. 46 LAKHS HAS BEEN OBTAINED, CANNOT BE ADDED AS DEEMED INCOME I N VIEW OF THE PROVISION OF SECTION 2(22)(E) OF THE ACT. ACCORDINGLY, WE DELETE THE ADDITION OF RS. 46,00,000/ - . 8 . REMAINING ISSUE IS AGAINST CONFIRMING THE DISALLOWANCE OF RS. 7,79,801/ - . 9 . BRIEF FACTS IN THIS REGARD ARE THAT THE DURING THE ASSESSMENT PROCEEDINGS, THE ASSESSEE WAS ASKED TO SUBMIT DETAILS OF EXPENSES AND ALSO TO PRODUCE BOOKS OF ACCOUNTS. THE AO NOTICED THAT THE ASSESSEE DEBITED A SUM OF RS. 14.8 4 LAKHS UNDER THE HEAD DEBIT BALANCE WRITTEN OFF. THE AO AFTER EXAMINING THE BOOKS OF ACCOUN TS AND OTHER RECORDS, FOUND THAT FOR DECIDING ABOUT DEBIT BALANCE WRITTEN OFF, THERE IS NO FIX CRITERIA. THIS IS DONE AS PER SWEET WILL OF THE ASSESSEE TO REDUCE THE TAX LIABILITIES. IT WAS FURTHER NOTED BY THE AO THAT AN AMOUNT OF RS. 14.84 LAKHS WAS REDUC ED TO RS. 7,79,801/ - BECAUSE OF MISTAKE WHICH WAS EXPLAINED DURING THE ASSESSMENT PROCEEDING. IT WAS FURTHER SEEN THAT PARTIES IN RESPECT OF WHICH DEBIT BALANCES HAVE BEEN WRITTEN OFF STILL CONTINUE BUSINESS WITH THE ASSESSEE. ACCORDINGLY, HE DISALLOWED A SUM OF RS. 7,79,801/ - . 10 . LEARNED CIT(A) ALSO CONFIRMED THE ACTION OF THE AO. 1 1 . AFTER CONSIDERING THE SUBMISSION AND PERUSING THE MATERIAL ON RECORD, ALONG WITH DETAIL OF EXPENSES, CLAIMED BY THE ASSESSEE, COPY OF ITA NO. 664 /20 1 2 6 WHICH IS PLACED IN THE COMPILATION, WE FOUND THAT THESE DEBIT BALANCES WRITTEN OFF BY THE ASSESSEE ARE IN NATURE OF DISCOUNT. THIS IS NOT A CASE OF DEPARTMENT THAT THE ASSESSEE HAS RECEIVED THESE AMOUNTS IN SUBSEQUENT YEAR. BECAUSE WE FOUND THAT AFTER NEGOTIATION, THE ASSESSEE HAS REDUCED TH E AMOUNT AND HAS SHOWN DEBIT BALANCES WRITTEN OFF. IN FACT, AS STATED ABOVE, THE DEBIT BALANCES WRITTEN OFF BY THE ASSESSEE ARE IN NATURE OF DISCOUNT. THE DISCOUNT HAS GIVEN IN THE REGULAR COURSE OF BUSINESS. THEREFORE, IT IS A BUSINESS LOSS AND IS ALLOWAB LE. WITHOUT GOING INTO DETAIL FURTHER, WE ALLOW THE GROUND OF THE ASSESSEE AS THE CLAIM OF THE ASSESSEE BEING DISCOUNT IN NATURE, IS ALLOW A BLE. 12 . RESULTANTLY , APPEAL OF THE ASSESSEE IS ALLOWED . ORDER PR ONOUNCED IN THE OPEN COURT ON THIS 1 ST DAY OF M AR . 201 3 . 201 3 SD/ - ( ) ( R.S.SYAL ) SD/ - ( ) ( R.K.GUPTA ) / ACCOUN TANT MEMBER / JUDICIAL MEMBER MUMBAI ; DATED : 0 1 / 0 3 / 201 3 . /PKM , PS COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. / THE CIT(A) , MUMBAI . 4. / CIT ITA NO. 664 /20 1 2 7 5. / DR, ITAT, MUMBAI . 6. GUARD FILE. //TRUE COPY// / BY ORDER, ( /ASSTT. REGISTRAR) / ITAT, MUMBAI